US Commercial Real Estate Crisis Risks Global Financial Contagion

The US commercial real estate market is facing a crisis stemming from issues that originated during the COVID pandemic, exacerbated by rising interest rates. This is causing property values to plunge.

The crisis is now spreading beyond the US as global banks took positions in US properties. Banks in Germany, Japan, and elsewhere are bracing for losses.

Some experts warn this could spiral into a wider financial crisis if distress spreads across global banking systems. Others believe the situation is manageable.

Nearly $2.2 trillion in US commercial real estate debt will mature by 2027, risking more defaults. Property prices are already falling at the fastest rate in 50 years.

So far emerging economies seem insulated, but could face indirect impacts if the crisis spreads more widely as in 2008.